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Dividends paid or credited by non-resident companies

Last updated 11 January 2005

If you are a shareholder of a New Zealand company that has paid a dividend that is franked with Australian franking credits, you may be eligible to claim a franking tax offset. For more information on how to claim the franking tax offset, see Trans-Tasman Imputation special rules.

Non-resident companies, other than certain New Zealand companies, are not subject to the imputation system and you will not be entitled to claim a franking tax offset for any tax paid by the company.

However, you may find that foreign tax has been withheld from the dividend so that the amount paid or credited to you is reduced.

In most circumstances, you will be liable to pay Australian income tax on the dividend. You must include on your tax return the full amount of the dividend at item 19 Foreign source income and foreign assets or property. This means the amount you are paid or credited plus the amount of any foreign tax which has been deducted. You may be able to claim a credit for the foreign tax paid.

In certain circumstances, foreign dividends may be exempt from tax. For example, they may be exempt to avoid any double taxation, or exempt because the portfolio out of which the dividends have been paid has already been taxed at a comparable rate.

There are special rules which need to be satisfied for you to claim a foreign tax credit. See question 19 in TaxPack 2004 supplement and the publication How to claim a foreign tax credit.


Emma Citizen has shares in a company resident in the United States. She was entitled to be paid a dividend of $400. Before she was paid the dividend the company deducted $60 in foreign tax, sending Emma the remaining $340. (Note: all amounts are in Australian dollars)

When she fills in her Australian tax return, Emma should include $400 at M item 19 on her tax return and she may be able to claim a foreign tax credit of $60 at O item 19.

End of example